A little bit of rain has made lot of a difference to farmers in Western Australia, who look set to keep the country in grain over the next 12 months and reap some of the best prices on record while doing it.

They are also likely to spare Australia the ignominy of having to import wheat after the state's rollercoaster grain growing season ended on a high thanks to some timely showers and mild temperatures last month that have increased the Grain Industry Association of WA (GIWA) production forecasts by more than 500,000 tonnes.

That alone is likely to put an extra $150 million in grower pockets and in terms of tonnes is almost equal to forecast total winter crop production in Queensland, where drought has sent expected yields plunging more than 70 per cent below the five-year average to 550,000 tonnes.

It is a similar story in NSW with Australian Crop Forecasters (ACF) predicting a crop of 2.47 million tonnes, down 77 per cent on the five-year average. Victoria is down 46 per cent based on an anticipated 3.7-million-tonne crop and South Australia down 43 per cent at 4.77 million tonnes.

In Queensland drought has sent expected wheat crop yields plunging more than 70 per cent below the five-year average to 550,000 tonnes.
Bloomberg

GIWA has the west sitting on 15.65 million tonnes, including 9.1 million tonnes of wheat, with harvest about to shift into top gear after some farmers held off to make the most of the favourable late season conditions.

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Moora farmer Erin Cahill, who started harvesting on Friday, said crops in most of WA had bounced back strongly after a taking a hit from frost and heat shock in September.

"We had an exceptionally cool and reasonably wet October which repaired things a bit and, all in all, it is going to be a pretty reasonable season and quite different to the east coast," he said.

Mr Cahill said the rare combination of a sizeable crop and high prices would make a big difference to WA farmers.

"We had a very high production year in 2016 but the price was quite moderate. We grew a lot of crop but financially it wasn't a belter," he said.

"Having price and production go together this year could actually do some wonders."

The on-farm price for wheat in the Midlands region, where he farms and advises more than 30 other farmers in his role as an agronomist, is hovering at between $300 and $320 a tonne whereas in 2016 it averaged about $240 a tonne on-farm.

There have also been isolated examples of what industry leaders describe as insane spot prices this year with one WA grower who delivered a truckload of lupins to port fetching $800 a tonne.

Profarmer Australia and ACF head Hannah Janson said the most severe and widespread drought since deregulation of the wheat industry a decade ago combined with WA's strong season had created an unprecedented flow of grain west to east and pushed prices to some of the highest levels on record.

ACF expects up 3.8 million tonnes of grain to flow from WA and South Australia to the eastern states to ease shortages and support livestock production. That is on top of about 1 million tonnes already delivered in 2017-18 at steeply rising prices.

High domestic demand

"The last time prices were this high was in the 2008-09 period. The difference is if you look at 08-09 a lot of that was driven by what was going on off-shore and really strong futures whereas what is going on now is being driven by the domestic market," Ms Janson said.

"Our numbers are for an east coast wheat crop to the tune of 3.7 to 3.8 million tonnes and east coast demand for wheat alone is about double that."

The size of the WA crop means Australia, regarded as one of the world's top agricultural producers, is likely to avoid the coal-to-Newcastle option and biosecurity risk associated with having to import grain. This is despite the option having some support among livestock producers and being raised at recent drought roundtable discussions.

"The reality is that for domestic customers the price of grain at the moment is pretty crippling," Ms Janson said.

"Even with a strong red meat market there is only so long you can keep forking out at current prices for grain. There is definitely a lot of pressure from the consumption side for imports to alleviate the situation, but given WA does have a crop it seems unlikely we will see grain imported."

A more likely scenario given the approval hurdles and hidden costs in sourcing unprocessed grain from offshore is a jump in imports of livestock feed supplements like processed soybean meal normally purchased from South America.

However, even that supply is in doubt in the fallout from US-China trade tensions with Beijing expected to turn to South America for soybean after dumping the US as a major supplier.

There are renewed hopes a decent summer crop of sorghum on the east coast might ease livestock feed shortages after recent rain in Queensland and NSW.

Some farmers continue to carry grain forward as a drought hedge two years on from a record crop that left Australia with more grain than it knew what to do with.

Growers in both sides of the country are expected to continue to the trend of storing grain on farm to give them more options in terms of feeding their own stock, taking advantage of high spot prices and cost management.

"I think given it is going to be a very domestic market this year most people will be avoiding the additional cost of using GrainCorp facilities and keeping it on farm and trying to access the domestic market," Ms Janson said.

Mr Cahill said marketing strategies varied from farmer-to-farmer and would play a big part in how much WA growers ultimately benefited from high prices and solid production.

He watched in awe this year as the free-in-store (delivered to port) malt barley price in WA soared to a $400 a tonne.

"If you go back and look at last three or four years, within season there has been about a $100 a tonne variation in grain prices so when barley got to $300 a tonne a lot of people thought 'I like that a lot better than $200 so let's start hedging'," he said.

"None of us in our wildest dreams ever thought that the $300 was going to turn into a $400."

The recent rain on the east coast and the start of harvest has taken an edge off prices but Mr Cahill is confident they will remain strong well into next year based on demand from the eastern states.

"They have a a lot of feeding to do to get livestock through the summer," he said. "And they will be feeding stock right through to June or July even if they get an April or May season break because they still have to get some pasture growth."

GIWA chief executive Larissa Taylor said there could be even more upside in the state's crop than reflected in the revised forecast of 15.65 million tonnes issued on Friday.

"So far estimates in the north [where harvest is well underway] are that yields are probably 10 per cent up on what we expected," she said.

"It has been a rollercoaster ride. It was a late start to the season, through July and August things were looking fantastic and then we had frost events at the end of August and a dry September which pulled back yield before a soft finish in October and some very welcome rains."

GIWA bumped up its wheat production forecast by 11.7 per cent from a month ago to 9.1 million tonnes based on the crop-friendly season finish and the barley forecast up by 10.5 per cent to 3.9 million tonnes.